Rather than binding to specific ligands like most receptors, olfactory receptors bind to structures on odor molecules. Once the odorant has bound to the odor receptor, the receptor activates the attached G protein on the inside of the olfactory receptor neuron. The G protein in turn activates adenylate cyclase which converts ATP to cyclic AMP(cAMP). The cAMP opens ion channels which allow sodiumions into the cell, depolarizing the olfactory receptor neuron and beginning an action potential which carries the information to the brain.

There are a wide range of different odor receptors, with as many as 1000 in the mammalian genome. Olfactory receptors may make up as much as 3% of the genome. Only a portion of these potential genes form functional odor receptors. According to an analysis of the Human genome project, humans have 347 functional genes coding for olfactory receptors. The reason for the large number of different odor receptors is to provide a system for detecting as many different odors as possible. Even so, each odor receptor does not correspond to just one odor. Each individual odor receptor is broadly tuned to be activated by a number of similar structures. Like the immune system, this system allows molecules that have never been encountered before to be characterized. Also most odors activate more than one type of odor receptor. This aspect provides for the identification of an almost limitless number of different molecules.